British biotech Astex Therapeutics landed a sizeable discovery deal with GlaxoSmithKline that comes as a surprise on two fronts: the big drug maker is guaranteeing $33 million, and the deal doesn't include options, which recently has been Glaxo's preferred method of discovery-stage deal-making.
Astex has been in business for 10 years, one of several firms hunting for small-molecule drugs by first finding small chemical fragments that bind to a biological target and then adding functionality to create compounds. This fragment-based discovery, which was pioneered by scientists at Abbott Laboratories in the mid-1990s, has just begun to push compounds into the clinic.
"Big Pharma is clearly interested in this approach, and by now every big pharma has its own effort in fragment screening," Astex CEO Harren Jhoti said in an interview on Nov. 12, when the deal was announced.
With the deal, Glaxo now has access to Astex's Pyramid discovery platform. The drug maker will supply Astex with "a handful" of targets, and Astex will hand back compounds. Glaxo is responsible for lead optimization and taking the compounds through preclinical and clinical development. Jhoti declined to say how many targets are in the agreement, or for how many years it runs.
This much is clear: Astex receives £20 million (U.S. $33 million) upfront, split between a £12.5 million fee and £7.5 million in equity. With that cash infusion, Astex will not need to seek capital until 2013, Jhoti said. The deal also calls for discovery milestones of up to £37 million (U.S. $61 million) that Jhoti expects to earn within two years.
Astex can earn more than £300 million (U.S. $500 million) in milestones, not including royalties.
This is a different approach for Glaxo. In recent years, the drug maker often structured such deals as options, paying small upfronts and giving itself the right to opt into compounds that their smaller partner provides. Glaxo has signed at least six such deals this year, the most recent in October in which $5 million was paid upfront to epigenetics research firm SuperGen for oncology compounds ('The Pink Sheet' DAILY, Oct. 26, 2009).
The Astex deal is not option-based, said Jhoti: "It's worked well for GSK and other biotechs, but the risk profile of an option-based deal wasn't something we were keen on."
In part, the cash will go to fund Astex's three clinical programs, all currently in Phase 1 and scheduled to move to Phase 2 within twelve months. The lead is multi-kinase inhibitor AT9283, which is being tested against solid tumors and leukemia.
Jhoti said the deal was negotiated through Patrick Vallence, the head of Glaxo drug discovery, not through the discovery centers that Glaxo has created with various levels of deal-making autonomy ( see 'GSK Tries to Mimic Real-World Biotech,' IN VIVO, February 2009). Jhoti likened the deal to "a halo effect" that sits above the decentralized "CEDD" structure of GSK's research units, meaning Astex's discovery technology will be at the disposal of any of the units.
When asked if Astex was able to avoid an option deal because the financial climate was beginning to brighten for early stage biotechs, Jhoti countered there was still "a lot of pain out there among biotech firms."
It's an open question whether option-based deals are in fact an indicator of negotiating strength. At a recent industry conference a panel debated that very question (see 'Option-Based Deals Are Here To Stay,' The IN VIVO Blog, Nov. 4, 2009). Some participants argued that biotechs might prefer option deals even if capital becomes readily available again, because they can advance a compound more efficiently than a big pharma partner.
- Alex Lash (a.lash@elsevier.com)
This article is reprinted from "The Pink Sheet" DAILY –Nov 12, 2009
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